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Strona główna / Podręcznik elektroniczny / Franchising / Text English

Franchising

Text English

It is difficult to find another example of an organizational innovation which has playedsuch a groundbreaking role as franchising. Franchising opened a completely new way to benefit from identifying a viable business idea and transforming it into a successful venture. Apart from the two basic forms of earning profits, i.e. running a profitable business or its sale, a third opportunity appeared: to make the business idea available to other entrepreneurs for monetary compensation under specific conditions stipulated in the franchise agreement. The general concept and essence of franchising will be presented in this section.
The importance of franchising in commerce and services can be compared to the transformations which occurred in the manufacturing industry in the first half of the 20th century due to automatization and widespread implementation of the large-scale production methods and organization techniques. This is when the division of the economy into the modern and traditional sectors began. In the latter sector, mainly in commerce and services, the introduction of modern methods was not possible due to the limited scale of operation. Thanks to franchising, modern organizational solutions have been applied in such areas as hamburger shops, bread baking and the provision of many specialist services.
Franchising developed in the USA in the second half of the 19th century. Fora long time, it functioned only as a system of distribution (distribution franchising). Manufacturers of industrial goods, such as sewing machines or cars, granted exclusive rights to sell their products on certain terms to independent distributors for some sort of compensation. In the distribution franchising system the element which organizes the relations between parties was the product.
The now predominant change, i.e. the franchise of a comprehensive concept of the business organization, known as business format franchising, just began to develop in the second half of the 20th century. Here, the key element of the mutual relations between the franchisor and the franchisee is not the product, but most of all, the manner in which the business is organized and ran. The franchising package made available by the franchisor includes the right to use the trademark, the standard marketing plan, the operating procedures described in detail in an operating manual, quality control systems , access to training, precise accounting and financial procedures, etc. It offers a great advantage for the franchisee, but also means an obligation to follow the strict procedures and rules of conducting the business as stipulated in the franchise agreement.
As a result, the number of people who undertook entrepreneurial initiatives significantly increased. It made it possible to start a business to those who had not been able to develop and implement own business idea, due to lack of creativity, experience or financial limitations. At the same time, franchising changed the operating conditions in many industries, particularly in services, which had formerly been the domain of small businesses and now are open to the growth-oriented business initiatives conducted on international scale.. Selling well tested business ideas instead of products and services can be regarded as the essence of entrepreneurship